Cardinal Health Reports Third Quarter Fiscal Year 2024 Results and Raises Fiscal Year 2024 Non-GAAP EPS Guidance
-
Revenue increased 9% to
$54.9 billion -
GAAP1 operating earnings were
$367 million ; GAAP diluted EPS was$1.05 -
Non-GAAP operating earnings increased 10% to
$666 million ; non-GAAP diluted EPS increased 20% to$2.08 -
Fiscal year 2024 non-GAAP EPS guidance
2
raised and narrowed to
$7.30 to$7.40 , from$7.20 to$7.35 -
Company provides preliminary fiscal year 2025 non-GAAP EPS guidance of at least
$7.50
"In Q3, we delivered broad-based growth, including solid profit growth in Pharmaceutical and Specialty Solutions, on top of an exceptionally strong quarter from a year ago," said
Q3 FY24 summary
|
Q3 FY24 |
|
Q3 FY23 |
|
Y/Y |
Revenue |
|
|
|
|
9 % |
Operating earnings |
|
|
|
|
(36) % |
Non-GAAP operating earnings |
|
|
|
|
10 % |
Net earnings attributable to |
|
|
|
|
(25) % |
Non-GAAP net earnings attributable to |
|
|
|
|
14 % |
Effective Tax Rate |
24.2 % |
|
36.3 % |
|
|
Non-GAAP Effective Tax Rate |
20.4 % |
|
22.4 % |
|
|
Diluted EPS attributable to |
|
|
|
|
(22) % |
Non-GAAP diluted EPS attributable to |
|
|
|
|
20 % |
Segment results 3
Pharmaceutical and Specialty Solutions segment
|
Q3 FY24 |
|
Q3 FY23 |
|
Y/Y |
Revenue |
$ 50.7 billion |
|
$ 46.5 billion |
|
9 % |
Segment profit |
$ 580 million |
|
$ 560 million |
|
4 % |
Third quarter revenue for the Pharmaceutical and Specialty Solutions segment increased 9% to
Pharmaceutical and Specialty Solutions segment profit increased 4% to
Global Medical Products and Distribution segment
|
Q3 FY24 |
|
Q3 FY23 |
|
Y/Y |
Revenue |
$ 3.1 billion |
|
$ 3.0 billion |
|
4 % |
Segment profit |
$ 20 million |
|
$ (46) million |
|
N.M. |
Third quarter revenue for the Global Medical Products and Distribution segment increased 4% to
Global Medical Products and Distribution segment profit increased
Other4
|
Q3 FY24 |
|
Q3 FY23 |
|
Y/Y |
Revenue |
$ 1.2 billion |
|
$ 1.0 billion |
|
14 % |
Segment profit |
$ 111 million |
|
$ 106 million |
|
5 % |
Third quarter revenue for Other increased 14% to
Other segment profit increased 5% to
Fiscal year 2024 outlook 2
The company raised and narrowed its fiscal year 2024 guidance range for non-GAAP diluted earnings per share attributable to
This guidance includes an update to the company's Pharmaceutical and Specialty Solutions segment profit outlook to 8.5% to 9.5% growth, from 7% to 9% growth.
Additionally, the company updated expectations for its non-GAAP effective tax rate to a range of 22% to 23%, from 23% to 24%.
Preliminary Fiscal Year 2025 outlook 2
The company is also providing preliminary guidance for fiscal year 2025:
|
FY25 outlook |
Non-GAAP Diluted EPS |
At least |
Pharmaceutical and Specialty Solutions |
At least 1% Segment profit growth |
Global Medical Products and Distribution |
Segment profit |
Other4 |
~10% Segment profit growth |
Interest and Other |
|
Non-GAAP Effective Tax Rate |
23% to 24% |
Diluted weighted average shares outstanding |
244M to 245M |
Baseline share repurchases |
|
Recent highlights
-
Cardinal Health completed its acquisition of Specialty Networks. Specialty Networks is an integrated multi-specialty platform that creates clinical and economic value for independent specialty providers and partners across urology, gastroenterology and rheumatology. -
Cardinal Health announced that its Board of Directors has elected Robert "Bob" Azelby as an independent director, effectiveMarch 1, 2024 .Mr. Azelby joins the board with over 30 years of experience, including as a Chief Executive Officer and board member in the biopharmaceutical, oncology and other specialty industries. -
Cardinal Health's U.S. Medical Products and Distribution business was recognized for high achievements in supply chain resiliency by HIRC's Resiliency Badge program, a healthcare industry benchmark. -
Cardinal Health released its Fiscal 2023 Environmental, Social and Governance (ESG) Report, highlighting the company's work toward building a healthier, more equitable future. Additionally, the company received approval by the Science Based Targets initiative (SBTi) for its near-term science-based greenhouse gas (GHG) emissions reduction targets. -
Debbie Weitzman , CEO of the Pharmaceutical and Specialty Solutions segment, and Michelle Greene, EVP, Chief Information Officer, were named to Reuters' Trailblazing Women lists for significant contributions to their fields. Additionally,Ola Snow , Chief Human Resources Officer, was selected as one of The HR Digest's top CHROs shaping the future of work. - Fortune has recognized
Cardinal Health as one of America's Most Innovative Companies for the second year in a row.
Upcoming webcasted investor events
-
Bank of America Securities Health Care Conference at11:00 a.m. EST ,May 14, 2024 -
Leerink Partners Healthcare Crossroads Conference at9:00 a.m. EST ,May 29, 2024
Webcast
Presentation slides and a webcast replay will be available on the Investor Relations page for 12 months.
About
Contacts
Media:
Investors:
1GAAP refers to
2The company does not provide forward-looking guidance on a GAAP basis as certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. See "Use of Non-GAAP Measures" following the attached schedules for additional explanation.
3Previously reported segment results have been recast to conform to the company's updated segment reporting structure.
4Other includes the following three operating segments: Nuclear and Precision Health Solutions (NPHS), at-Home Solutions and OptiFreight® Logistics, which are not significant enough individually to require reportable segment disclosure.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and various accruals and estimates. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include risks arising from ongoing inflationary pressures, including the risk that our plans to mitigate such effects may not be as successful as we anticipate or that costs could remain elevated; risks associated with our ongoing review of our operations, portfolio and businesses, including the risk that our management team could become distracted or that the outcome of such review may have unintended consequences; competitive pressures in
Schedule 1 |
|||||||||||
Condensed Consolidated Statements of Earnings (Unaudited) |
|||||||||||
|
|
|
|
||||||||
|
Third Quarter |
|
Year-to-Date |
||||||||
(in millions, except per common share amounts) |
2024 |
|
2023 |
|
% Change |
|
2024 |
|
2023 |
|
% Change |
Revenue |
$ 54,911 |
|
$ 50,487 |
|
9 % |
|
$ 167,119 |
|
$ 151,559 |
|
10 % |
Cost of products sold |
52,964 |
|
48,702 |
|
9 % |
|
161,558 |
|
146,497 |
|
10 % |
Gross margin |
1,947 |
|
1,785 |
|
9 % |
|
5,561 |
|
5,062 |
|
10 % |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Distribution, selling, general and administrative expenses |
1,282 |
|
1,179 |
|
9 % |
|
3,762 |
|
3,567 |
|
5 % |
Restructuring and employee severance |
53 |
|
16 |
|
|
|
106 |
|
62 |
|
|
Amortization and other acquisition-related costs |
80 |
|
74 |
|
|
|
207 |
|
216 |
|
|
Impairments and (gain)/loss on disposal of assets, net 1 |
84 |
|
20 |
|
|
|
622 |
|
883 |
|
|
Litigation (recoveries)/charges, net |
81 |
|
(76) |
|
|
|
29 |
|
(256) |
|
|
Operating earnings |
367 |
|
572 |
|
(36) % |
|
835 |
|
590 |
|
42 % |
|
|
|
|
|
|
|
|
|
|
|
|
Other (income)/expense, net |
(7) |
|
— |
|
|
|
(25) |
|
(5) |
|
|
Interest expense, net |
33 |
|
28 |
|
18 % |
|
55 |
|
78 |
|
(29) % |
Earnings before income taxes |
341 |
|
544 |
|
(37) % |
|
805 |
|
517 |
|
56 % |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes 2 |
82 |
|
197 |
|
(58) % |
|
186 |
|
189 |
|
(2) % |
Net earnings |
259 |
|
347 |
|
(25) % |
|
619 |
|
328 |
|
89 % |
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings attributable to noncontrolling interests |
(1) |
|
(2) |
|
|
|
(3) |
|
(3) |
|
|
Net earnings attributable to |
$ 258 |
|
$ 345 |
|
(25) % |
|
$ 616 |
|
$ 325 |
|
90 % |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share attributable to |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ 1.06 |
|
$ 1.35 |
|
(21) % |
|
$ 2.51 |
|
$ 1.24 |
|
N.M. |
Diluted |
1.05 |
|
1.34 |
|
(22) % |
|
2.49 |
|
1.23 |
|
N.M. |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
243 |
|
256 |
|
|
|
245 |
|
263 |
|
|
Diluted |
245 |
|
258 |
|
|
|
247 |
|
264 |
|
|
|
1 For the three and nine months ended |
2 For fiscal 2024, the net tax benefit related to the impairment charge is |
Schedule 2 |
|||
Condensed Consolidated Balance Sheets |
|||
|
|
|
|
(in millions) |
|
|
|
Assets |
(Unaudited) |
|
|
Current assets: |
|
|
|
Cash and equivalents |
$ 3,718 |
|
$ 4,043 |
Trade receivables, net |
11,566 |
|
11,344 |
Inventories, net |
17,277 |
|
15,940 |
Prepaid expenses and other |
3,161 |
|
2,362 |
Assets held for sale |
12 |
|
144 |
Total current assets |
35,734 |
|
33,833 |
|
|
|
|
Property and equipment, net |
2,470 |
|
2,462 |
|
6,507 |
|
6,081 |
Other assets |
1,169 |
|
1,041 |
Total assets |
$ 45,880 |
|
$ 43,417 |
|
|
|
|
Liabilities and Shareholders' Deficit |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ 32,089 |
|
$ 29,813 |
Current portion of long-term obligations and other short-term borrowings |
1,187 |
|
792 |
Other accrued liabilities |
3,030 |
|
3,059 |
Liabilities related to assets held for sale |
— |
|
42 |
Total current liabilities |
36,306 |
|
33,706 |
|
|
|
|
Long-term obligations, less current portion |
4,667 |
|
3,909 |
Deferred income taxes and other liabilities |
8,169 |
|
8,653 |
|
|
|
|
Total shareholders' deficit |
(3,262) |
|
(2,851) |
Total liabilities and shareholders' deficit |
$ 45,880 |
|
$ 43,417 |
Schedule 3 |
|||||||
Condensed Consolidated Statements of Cash Flows (Unaudited ) |
|||||||
|
|
|
|
||||
|
Third Quarter |
|
Year-to-Date |
||||
(in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net earnings |
$ 259 |
|
$ 347 |
|
$ 619 |
|
$ 328 |
|
|
|
|
|
|
|
|
Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
177 |
|
175 |
|
524 |
|
516 |
Impairments and (gain)/loss on disposal of assets, net |
84 |
|
20 |
|
622 |
|
883 |
Share-based compensation |
31 |
|
21 |
|
88 |
|
69 |
Provision for bad debts |
16 |
|
20 |
|
59 |
|
79 |
Change in operating assets and liabilities, net of effects from acquisitions and divestitures: |
|
|
|
|
|
|
|
(Increase)/decrease in trade receivables |
225 |
|
409 |
|
(262) |
|
(510) |
(Increase)/decrease in inventories |
1,165 |
|
631 |
|
(1,371) |
|
(1,012) |
Increase/(decrease) in accounts payable |
(2,170) |
|
(481) |
|
2,276 |
|
2,473 |
Other accrued liabilities and operating items, net |
164 |
|
219 |
|
(870) |
|
(845) |
Net cash provided by/(used in) operating activities |
(49) |
|
1,361 |
|
1,685 |
|
1,981 |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Acquisition of subsidiaries, net of cash acquired |
(1,192) |
|
(10) |
|
(1,192) |
|
(10) |
Proceeds from divestitures, net of cash sold |
— |
|
— |
|
9 |
|
— |
Additions to property and equipment |
(112) |
|
(109) |
|
(318) |
|
(264) |
Proceeds from disposal of property and equipment |
8 |
|
— |
|
10 |
|
2 |
Purchases of investments |
(1) |
|
(1) |
|
(3) |
|
(6) |
Proceeds from investments |
— |
|
— |
|
1 |
|
1 |
Proceeds from net investment hedge terminations |
— |
|
29 |
|
28 |
|
29 |
Purchases of short-term time deposits |
(550) |
|
— |
|
(550) |
|
— |
Net cash used in investing activities |
(1,847) |
|
(91) |
|
(2,015) |
|
(248) |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from long-term obligations, net of issuance costs |
1,139 |
|
— |
|
1,139 |
|
— |
Reduction of long-term obligations |
(8) |
|
(558) |
|
(23) |
|
(571) |
Net tax proceeds from share-based compensation |
22 |
|
2 |
|
23 |
|
11 |
Dividends on common shares |
(122) |
|
(128) |
|
(377) |
|
(399) |
Purchase of treasury shares |
— |
|
(250) |
|
(750) |
|
(1,500) |
Net cash provided by/(used in) financing activities |
1,031 |
|
(934) |
|
12 |
|
(2,459) |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and equivalents |
(8) |
|
— |
|
(7) |
|
(1) |
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and equivalents |
(873) |
|
336 |
|
(325) |
|
(727) |
Cash and equivalents at beginning of period |
4,591 |
|
3,654 |
|
4,043 |
|
4,717 |
Cash and equivalents at end of period |
$ 3,718 |
|
$ 3,990 |
|
$ 3,718 |
|
$ 3,990 |
Schedule 4 |
|||||||||||
Segment Information |
|||||||||||
|
|
||||||||||
|
Third Quarter |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical and Specialty Solutions |
|
Global Medical Products and Distribution |
|
Other |
||||||
(in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Amount |
$ 50,651 |
|
$ 46,496 |
|
$ 3,113 |
|
$ 2,989 |
|
$ 1,167 |
|
$ 1,025 |
Growth rate |
9 % |
|
14 % |
|
4 % |
|
(8) % |
|
14 % |
|
16 % |
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
|
|
|
|
|
|
|
|
|
|
Amount |
$ 580 |
|
$ 560 |
|
$ 20 |
|
$ (46) |
|
$ 111 |
|
$ 106 |
Growth rate |
4 % |
|
23 % |
|
N.M. |
|
N.M. |
|
5 % |
|
13 % |
Segment profit margin |
1.15 % |
|
1.20 % |
|
0.64 % |
|
(1.54) % |
|
9.51 % |
|
10.34 % |
|
Year-to-Date |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical and Specialty Solutions |
|
Global Medical Products and Distribution |
|
Other |
||||||
(in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Amount |
$ 154,524 |
|
$ 139,441 |
|
$ 9,264 |
|
$ 9,140 |
|
$ 3,392 |
|
$ 3,038 |
Growth rate |
11 % |
|
15 % |
|
1 % |
|
(10) % |
|
12 % |
|
16 % |
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
|
|
|
|
|
|
|
|
|
|
Amount |
$ 1,541 |
|
$ 1,394 |
|
$ 18 |
|
$ (175) |
|
$ 319 |
|
$ 305 |
Growth rate |
11 % |
|
13 % |
|
N.M. |
|
N.M. |
|
5 % |
|
6 % |
Segment profit margin |
1.00 % |
|
1.00 % |
|
0.19 % |
|
(1.91) % |
|
9.40 % |
|
10.04 % |
|
The sum of the components and certain computations may reflect rounding adjustments. |
Our previously reported fiscal 2023 segment results have been recast to conform to our new reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate expenses for shared functions, which are driven by the reporting structure change. |
Schedule 5 |
|||||||||||||
GAAP / Non-GAAP Reconciliation1 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
Operating |
Earnings |
|
|
Net |
|
|
Diluted |
|
|
Margin |
|
SG&A 2 |
|
Earnings |
Before |
Provision for |
|
Earnings 3 |
Effective |
|
EPS 3 |
(in millions, except per common share amounts) |
Gross |
Growth |
|
Growth |
Operating |
Growth |
Income |
Income |
Net |
Growth |
Tax |
Diluted |
Growth |
Margin |
Rate |
SG&A 2 |
Rate |
Earnings |
Rate |
Taxes |
Taxes |
Earnings 3 |
Rate |
Rate |
EPS 3 |
Rate |
|
Third Quarter 2024 |
|||||||||||||
GAAP |
$ 1,947 |
9 % |
$ 1,282 |
9 % |
$ 367 |
(36) % |
$ 341 |
$ 82 |
$ 258 |
(25) % |
24.2 % |
$ 1.05 |
(22) % |
Shareholder cooperation agreement costs |
— |
|
(1) |
|
1 |
|
1 |
— |
1 |
|
|
— |
|
Restructuring and employee severance |
— |
|
— |
|
53 |
|
53 |
14 |
39 |
|
|
0.16 |
|
Amortization and other acquisition-related costs |
— |
|
— |
|
80 |
|
80 |
21 |
59 |
|
|
0.24 |
|
Impairments and (gain)/loss on disposal of assets, net 4 |
— |
|
— |
|
84 |
|
84 |
(21) |
105 |
|
|
0.44 |
|
Litigation (recoveries)/charges, net |
— |
|
— |
|
81 |
|
81 |
34 |
47 |
|
|
0.19 |
|
Non-GAAP |
$ 1,947 |
9 % |
$ 1,281 |
9 % |
$ 666 |
10 % |
$ 640 |
$ 130 |
$ 509 |
14 % |
20.4 % |
$ 2.08 |
20 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2023 |
||||||||||||
GAAP |
$ 1,785 |
6 % |
$ 1,179 |
4 % |
$ 572 |
N.M. |
$ 544 |
$ 197 |
$ 345 |
N.M. |
36.3 % |
$ 1.34 |
N.M. |
Restructuring and employee severance |
— |
|
— |
|
16 |
|
16 |
4 |
12 |
|
|
0.05 |
|
Amortization and other acquisition-related costs |
— |
|
— |
|
74 |
|
74 |
19 |
55 |
|
|
0.21 |
|
Impairments and (gain)/loss on disposal of assets, net 4 |
— |
|
— |
|
20 |
|
20 |
(69) |
89 |
|
|
0.35 |
|
Litigation (recoveries)/charges, net |
— |
|
— |
|
(76) |
|
(76) |
(22) |
(54) |
|
|
(0.21) |
|
Non-GAAP |
$ 1,785 |
6 % |
$ 1,179 |
4 % |
$ 606 |
11 % |
$ 578 |
$ 129 |
$ 447 |
11 % |
22.4 % |
$ 1.74 |
20 % |
|
1 For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules. |
2 Distribution, selling, general and administrative expenses. |
3 Attributable to |
4 For the three months ended
For the nine months ended
The sum of the components and certain computations may reflect rounding adjustments. We generally apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred. |
Schedule 5 |
|||||||||||||
GAAP / Non-GAAP Reconciliation1 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
Operating |
Earnings |
|
|
Net |
|
|
Diluted |
|
|
Margin |
|
SG&A 2 |
|
Earnings |
Before |
Provision for |
|
Earnings3 |
Effective |
|
EPS 3 |
|
Gross |
Growth |
|
Growth |
Operating |
Growth |
Income |
Income |
Net |
Growth |
Tax |
Diluted |
Growth |
(in millions, except per common share amounts) |
Margin |
Rate |
SG&A 2 |
Rate |
Earnings |
Rate |
Taxes |
Taxes |
Earnings 3 |
Rate |
Rate |
EPS 3 |
Rate |
Year-to-Date 2024 |
|||||||||||||
GAAP |
$ 5,561 |
10 % |
$ 3,762 |
5 % |
$ 835 |
42 % |
$ 805 |
$ 186 |
$ 616 |
90 % |
23.2 % |
$ 2.49 |
N.M. |
Shareholder cooperation agreement costs |
— |
|
(1) |
|
1 |
|
1 |
— |
1 |
|
|
— |
|
Restructuring and employee severance |
— |
|
— |
|
106 |
|
106 |
28 |
78 |
|
|
0.32 |
|
Amortization and other acquisition-related costs |
— |
|
— |
|
207 |
|
207 |
54 |
153 |
|
|
0.62 |
|
Impairments and (gain)/loss on disposal of assets, net 4 |
— |
|
— |
|
622 |
|
622 |
92 |
530 |
|
|
2.14 |
|
Litigation (recoveries)/charges, net |
— |
|
— |
|
29 |
|
29 |
17 |
12 |
|
|
0.05 |
|
Non-GAAP |
$ 5,561 |
10 % |
$ 3,762 |
6 % |
$ 1,799 |
20 % |
$ 1,769 |
$ 377 |
$ 1,389 |
24 % |
21.3 % |
$ 5.62 |
33 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date 2023 |
||||||||||||
GAAP |
$ 5,062 |
2 % |
$ 3,567 |
5 % |
$ 590 |
N.M. |
$ 517 |
$ 189 |
$ 325 |
N.M. |
36.7 % |
$ 1.23 |
N.M. |
State opioid assessment related to prior fiscal years |
— |
|
6 |
|
(6) |
|
(6) |
(2) |
(4) |
|
|
0.02 |
|
Shareholder cooperation agreement costs |
— |
|
(8) |
|
8 |
|
8 |
2 |
6 |
|
|
(0.02) |
|
Restructuring and employee severance |
— |
|
— |
|
62 |
|
62 |
14 |
48 |
|
|
0.18 |
|
Amortization and other acquisition-related costs |
— |
|
— |
|
216 |
|
216 |
56 |
160 |
|
|
0.61 |
|
Impairments and (gain)/loss on disposal of assets, net 4 |
— |
|
— |
|
883 |
|
883 |
138 |
745 |
|
|
2.82 |
|
Litigation (recoveries)/charges, net |
— |
|
— |
|
(256) |
|
(256) |
(98) |
(158) |
|
|
(0.60) |
|
Non-GAAP |
$ 5,062 |
2 % |
$ 3,565 |
5 % |
$ 1,497 |
(3) % |
$ 1,424 |
$ 299 |
$ 1,122 |
(1) % |
21.0 % |
$ 4.24 |
6 % |
|
1 For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules. |
2 Distribution, selling, general and administrative expenses. |
3 Attributable to |
4 For the nine months ended
For the nine months ended
|
Schedule 6 |
|||||||
GAAP / Non-GAAP Reconciliation - GAAP Cash Flow to Non-GAAP Adjusted Free Cash Flow |
|||||||
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Year-to-Date |
||||
(in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
GAAP - Cash Flow Categories |
|
|
|
|
|
|
|
Net cash provided by/(used in) operating activities |
$ (49) |
|
$ 1,361 |
|
$ 1,685 |
|
$ 1,981 |
Net cash used in investing activities |
(1,847) |
|
(91) |
|
(2,015) |
|
(248) |
Net cash provided by/(used in) financing activities |
1,031 |
|
(934) |
|
12 |
|
(2,459) |
Effect of exchange rate changes on cash and equivalents |
(8) |
|
— |
|
(7) |
|
(1) |
Net increase/(decrease) in cash and equivalents |
$ (873) |
|
$ 336 |
|
$ (325) |
|
$ (727) |
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Free Cash Flow |
|
|
|
|
|
|
|
Net cash provided by/(used in) operating activities |
$ (49) |
|
$ 1,361 |
|
$ 1,685 |
|
$ 1,981 |
Additions to property and equipment |
(112) |
|
(109) |
|
(318) |
|
(264) |
Payments related to matters included in litigation (recoveries)/charges, net |
246 |
|
57 |
|
761 |
|
373 |
Non-GAAP Adjusted Free Cash Flow |
$ 85 |
|
$ 1,309 |
|
$ 2,128 |
|
$ 2,090 |
|
For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules. |
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with
In addition to analyzing our business based on financial information prepared in accordance with GAAP, we use these non-GAAP financial measures internally to evaluate our performance, engage in financial and operational planning, and determine incentive compensation because we believe that these measures provide additional perspective on and, in some circumstances are more closely correlated to, the performance of our underlying, ongoing business. We provide these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on our financial and operating results on a year-over-year basis and in comparing our performance to that of our competitors. However, the non-GAAP financial measures that we use may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The non-GAAP financial measures disclosed by us should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.
Exclusions from Non-GAAP Financial Measures
Management believes it is useful to exclude the following items from the non-GAAP measures presented in this report for its own and for investors' assessment of the business for the reasons identified below:
- LIFO charges and credits are excluded because the factors that drive last-in first-out ("LIFO") inventory charges or credits, such as pharmaceutical manufacturer price appreciation or deflation and year-end inventory levels (which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end), are largely out of our control and cannot be accurately predicted. The exclusion of LIFO charges and credits from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies' financial results. We did not recognize any LIFO charges or credits during the periods presented.
- State opioid assessments related to prior fiscal years is the portion of state assessments for prescription opioid medications that were sold or distributed in periods prior to the period in which the expense is incurred. This portion is excluded from non-GAAP financial measures because it is retrospectively applied to sales in prior fiscal years and inclusion would obscure analysis of the current fiscal year results of our underlying, ongoing business. Additionally, while states' laws may require us to make payments on an ongoing basis, the portion of the assessment related to sales in prior periods are contemplated to be one-time, nonrecurring items. Income from state opioid assessments related to prior fiscal years represents reversals of accruals due to changes in estimates or when the underlying assessments were invalidated by a Court or reimbursed by manufacturers.
-
Shareholder cooperation agreement costs includes costs such as legal, consulting and other expenses incurred in relation to the agreement (the "Cooperation Agreement") entered into among
Elliott Associates, L.P. ,Elliott International, L.P. (together, "Elliott") andCardinal Health , including costs incurred to negotiate and finalize the Cooperation Agreement and costs incurred by the Business Review Committee of the Board of Directors, which was formed under this Cooperation Agreement. We have excluded these costs from our non-GAAP metrics because they do not occur in or reflect the ordinary course of our ongoing business operations and may obscure analysis of trends and financial performance. - Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business and include, but are not limited to, costs related to divestitures, closing and consolidating facilities, changing the way we manufacture or distribute our products, moving manufacturing of a product to another location, changes in production or business process outsourcing or insourcing, employee severance and realigning operations.
- Amortization and other acquisition-related costs, which include transaction costs, integration costs, and changes in the fair value of contingent consideration obligations, are excluded because they are not part of the ongoing operations of our underlying business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies' financial results. Additionally, costs for amortization of acquisition-related intangible assets are non-cash amounts, which are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion facilitates comparison of historical, current and forecasted financial results. We also exclude other acquisition-related costs, which are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entity's initial balance sheet as part of the purchase price allocation. These costs are also significantly impacted by the timing, complexity and size of acquisitions.
- Impairments and gain or loss on disposal of assets, net are excluded because they do not occur in or reflect the ordinary course of our ongoing business operations and are inherently unpredictable in timing and amount, and in the case of impairments, are non-cash amounts, so their exclusion facilitates comparison of historical, current and forecasted financial results.
- Litigation recoveries or charges, net are excluded because they often relate to events that may have occurred in prior or multiple periods, do not occur in or reflect the ordinary course of our business and are inherently unpredictable in timing and amount.
- Loss on early extinguishment of debt is excluded because it does not typically occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions.
The tax effect for each of the items listed above is determined using the tax rate and other tax attributes applicable to the item and the jurisdiction(s) in which the item is recorded. The gross, tax and net impact of each item are presented with our GAAP to non-GAAP reconciliations.
Non-GAAP adjusted free cash flow: We provide this non-GAAP financial measure as a supplemental metric to assist readers in assessing the effects of items and events on our cash flow on a year-over-year basis and in comparing our performance to that of our peer group companies. In calculating this non-GAAP metric, certain items are excluded from net cash provided by/(used in) operating activities because they relate to significant and unusual or non-recurring events and are inherently unpredictable in timing and amount. We believe adjusted free cash flow is important to management and useful to investors as a supplemental measure as it indicates the cash flow available for working capital needs, debt repayments, dividend payments, share repurchases, strategic acquisitions, or other strategic uses of cash. A reconciliation of our GAAP financial results to Non-GAAP adjusted free cash flow is provided in Schedule 6 of the financial statement tables included with this release.
Forward Looking Non-GAAP Measures
In this document, the Company presents certain forward-looking non-GAAP metrics. The Company does not provide outlook on a GAAP basis because the items that the Company excludes from GAAP to calculate the comparable non-GAAP measure can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of the Company's routine operating activities. Additionally, management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis.
The occurrence, timing and amount of any of the items excluded from GAAP to calculate non-GAAP could significantly impact the Company's fiscal 2024 GAAP results. Over the past five fiscal years, the excluded items have impacted the Company's EPS from
Definitions
Growth rate calculation: growth rates in this report are determined by dividing the difference between current-period results and prior-period results by prior-period results.
Interest and Other, net: other (income)/expense, net plus interest expense, net.
Segment Profit: segment revenue minus (segment cost of products sold and segment distribution, selling, general and administrative expenses).
Segment Profit margin: segment profit divided by segment revenue.
Non-GAAP gross margin: gross margin, excluding LIFO charges/(credits).
Non-GAAP distribution, selling, general and administrative expenses or Non-GAAP SG&A: distribution, selling, general and administrative expenses, excluding state opioid assessment related to prior fiscal years and shareholder cooperation agreement costs.
Non-GAAP operating earnings: operating earnings excluding (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net and (7) litigation (recoveries)/charges, net.
Non-GAAP earnings before income taxes: earnings before income taxes excluding (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net, (7) litigation (recoveries)/charges, net and (8) loss on early extinguishment of debt.
Non-GAAP net earnings attributable to
Non-GAAP effective tax rate: provision for income taxes adjusted for the tax impacts of (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net, (7) litigation (recoveries)/charges, net and (8) loss on early extinguishment of debt divided by (earnings before income taxes adjusted for the eight items above).
Non-GAAP diluted earnings per share attributable to
Non-GAAP adjusted free cash flow: net cash provided by/(used in) operating activities less payments related to additions to property and equipment, excluding settlement payments and receipts related to matters included in litigation (recoveries)/charges, net, as defined above, or other significant and unusual or non-recurring cash payments or receipts.
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